Last year, Korean nonlife insurance firms struggled to cope with marine business, reporting direct premiums written of KRW607.99 billion (US$540 million) in this class of business, down 14.26% from the previous year as the shipping sector remained weak.
The General Insurance Association of Korea, which provided the 2016 data, said the contraction was seen throughout last year. The insurers' total direct premiums written for marine insurance shrank by 19.88% in the first quarter of 2016 from the corresponding period of the previous year, 14.33% in the second quarter and 14.18% in the third quarter, reported The Korea Times.
The country’s biggest general insurer, Samsung Fire & Marine, saw its premium income more than halved in two years. The insurer reported that marine direct premiums written declined by 38.65% to KRW98.89 billion. Its marine insurance business has shrunk since 2014 when direct premiums written peaked at KRW202.47 billion. Samsung Fire, headed by CEO Ahn Min-soo, said that it had intended the business contraction.
"Based on accumulated data, we are slashing the number of contracts with high loss ratios and filling the portfolio with contracts with lower risks," a Samsung Fire official said. "Although our marine insurance sales decreased, our profitability improved."
However, the Seoul-based firm refused to disclose data on its improved profitability.
"Marine insurance is not the major business of nonlife insurance companies. Hence, the decreased income in the marine segment would not pose a great threat to any firm," a Seoul analyst said.
"But obviously it is not good news. They would hope to bounce back in the area in line with the recovery of the shipping industry. One uncertainty is that it is not sure when the recovery would happen."
The global shipping downturn has affected Korean shipping companies and shipbuilding yards. In February, Seoul court declared Hanjin Shipping bankrupt. Once among the largest container lines in the world, Hanjin had filed for bankruptcy protection last August with debts totalling US$5.37 billion as creditors refused to bail it out. An accounting firm hired by the Seoul court concluded that the firm's liquidation value would be greater than its worth as a going concern.